How Business Credit Impacts Small Business Owners

How Business Credit Impacts Small Business Owners

Getting a hold of your business finances is key to growing and succeeding, whether you’re running a franchise or are a small business owner. But there’s one thing that doesn’t get enough spotlight, yet it’s crucial for your future: your business credit score.

Here’s the scoop:

  • What exactly is a business credit score?
  • How it varies from your personal credit score
  • Why it matters so much for small business owners
  • Tips on boosting and maintaining a healthy business credit score


What is a Business Credit Score?
A business credit score is a number based on a company’s credit history that represents its creditworthiness. Similar to a personal credit score, lenders, suppliers, and financial institutions use it to assess your business’s health and any risk of lending or extending credit to you.


Business Credit Score vs. Personal Credit Score

While both scores ultimately aim to illustrate the pros and cons of lending to you, there are key differences between them.

  • Scoring System: Business credit scores generally range from 0 to 100, whereas personal credit scores usually range from 300 to 850.
  • Evaluation Criteria: Business credit scores focus more on factors such as payment history to vendors and lenders, whereas personal credit scores consider debt-to-income ratio, length of credit history, etc.
  • Privacy: Personal credit scores are strictly private, while business credit scores are publicly accessible, meaning anyone can request your business’s score.


Why Your Business Credit Score is Important

For small business owners, understanding of your business credit score is vital for several reasons:

  • Client Confidence: A strong business credit score can enhance your reputation in the market, instilling confidence among clients and suppliers.
  • Financing Opportunities: It significantly impacts your ability to secure financing. Higher scores typically qualify you for more favorable terms and a better rate.
  • Insurance Needs: Did you know that the cost of business insurance can increase as your company grows? Keeping your business credit score healthy can help you control these costs.


How to Earn & Keep a Healthy Business Credit Score

Building a healthy business credit score doesn’t happen overnight. It requires persistence and a bit of strategic planning. Here are some steps to take:

  • Establish Your Business: Ensure your business is officially registered and has a federal tax identification number (EIN).
  • Open Business Credit: Apply for business credit with major business credit bureaus like Dun & Bradstreet, Experian, and Equifax.
  • Pay Bills on Time: Regular, on-time, even early payments can positively impact your credit score, showing your reliability to lenders.
  • Use Your Business Credit Card Responsibly: Be mindful of how much credit you use. Try to maintain your credit utilization ratio to around 25%.
  • Monitor Your Credit: Regularly check your business credit reports to track and fix errors or spot sketchy activity. Remember, your personal credit score may also be considered by lenders, so it’s important to monitor both.


Improve Your Business with Ceterus’ Bookkeeping Services

For small business owners, navigating your business’s financial health can be overwhelming. Ceterus simplifies this. 

With our tech-enabled software and a dedicated financial controller, you’ll receive help in the form of:

  • Getting your books off the backburner
  • Timely and accurate financial reporting
  • Performance management, including benchmarking
  • Dedicated financial consultations
  • And so much more!


Don’t wait! Learn more about our business bookkeeping services, and schedule a consultation with us today.

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